Review of Strategies for Reaching Poor Women and Men

Hi Team,

I just read two articles -- Women’s World Banking “What Do Microfinance Customers Value?” & CGAP’s “Safe and Accessible: Bringing Poor Savers into The Formal Financial System” -- and thought I'd share what I took away from the articles:

Poor men and women use savings as a strategy for economic management and there is a high demand for savings opportunities despite low use of formal savings mechanisms and institutions. Many poor men and women turn to informal savings groups because they seem to offer greater accessibility, defined in terms of proximity, affordability, and liquidity. In one study lenders measured “turn-around-time” as the most important factor when considering a loan.

Poor individuals also prioritize security when identifying savings opportunity. While formal mechanisms may appear more secure to the outside observer, because the risks associated with these mechanisms tend to be less transparent, they may appear riskier to poor prospective savers; in short, it may be “easy for clients to misjudge the relative security of informal versus formal options” (Deshpande 2005). Moreover, clients typically express an interest in clear requirements that they can understand and uphold.

Interestingly, some studies indicate that many individuals express a preference for individual vs. group loans; they feel more secure on their own (perhaps b/c they have full information about risk etc).

Finally and not surprisingly, micro credit recipients also typically express an interest in higher loan amounts, more flexible terms (no compulsory savings), and lower interest rates.

Formal institutions should do more to make their offerings accessible and intelligible to poor savers. Various technological innovations (i.e. phone banking) have been introduced and indicate first steps in this direction. As we move forward with our project it will be useful to use this framework (accessibility; security; flexibility) to examine the practices of various MFIs in Addis Ababa.

Review of USAID report on Ethiopia’s Micro enterprise Sector

Hi Team,

I thought I’d share some insights from a report I read recently….while most of the report focuses on rural populations and agricultural strategies for micro enterprise (85% of the Ethiopian population is rural), it also offers insights relevant to our work in Addis. Some of USAID’s key recommendations involve: 1) insuring that new businesses are “market led” (meaning demand-driven) and 2) encouraging MFIs to charge appropriate (higher) fees for loans and training. Both of these recommendations seek to move new enterprises and MFIs toward more sustainable practices.

According the report, all levels of enterprise (non-agricultural products and services) have been slow to develop for a number of reasons, including Ethiopia’s “traditional insularity,” the government’s belief that agricultural production should drive the economy, high risk-aversion among impoverished populations, and the minimal amount of income available for consumption that exists in local markets. For these reasons, USAID also suggests that linkages need to be made between Ethiopian producers and non-Ethiopian/global markets.

In addition to highlighting the importance of “pursuing markets,” the report also highlights the importance of business training. The report notes that there are currently five key players in this arena – Bureau of Education (BOE), Bureau of Labor and Social Affairs (BOLSA), Federal Micro and Small Enterprise Development Agency (FEMSEDA), Polytechnic Institutes and NGOs (ADA, Lutheran World Relief, possibly EOC, Worldvision, FHI).

The report suggests a particular organization, Women’s Enterprise Promotion Center (WEPC) that could provide a useful partnership for our team, especially in regards to provision of training. Apparently WEPC, which is based in Addis, has been focused on craft training and marketing, but has somehow fallen into the typical pattern of producing without clear indications of demand (thus, build-up of inventory). However, the group is cognizant of this pitfall and is exploring more “order-based” production. FEMSEDA’s CEFE training (competency-based economic training and education) is also highly regarded and is certainly worth exploring.

USAID advises that, like production, training should also be demand-driven. In short, the report suggests that Ethiopian enterprises need to “go where the money is” and tap into external markets (ex; flies for flyfishing – made with local products but sold to western markets). This shift in focus to external markets will catalyze “economic priming” necessary for further development. In short, this report offers a useful discussion of the MFI landscape in Ethiopia (albeit in 2000) and provides some interesting strategic recommendations.

Project Plans_Preparation

Project Tasks

Mission Statement & Project Name

Initial Draft

Revision 1

Final Pass

Team-wide Distribution

Team Values

Initial Draft

Revision 1

Final Pass

Team-wide Distribution

Language Training

Goal 1: Demonstrate respect for the culture

Goal 2: Interact with stakeholders

Goal 3: Basics of "Getting Around"

Micro-enterprise Research

Contacts (Duke & UNC Communities)

NGOs (RTP; Ethiopia)

Conferences (Footprints; DMFI Talk Series)

Journal Articles (MFI best practices; HIV pop)

Books (MFI practices; Ethiopian Culture)

Films (MFI practices; Ethiopian Culture)

Team Building

Trust Exercises

Language/Culture Lessons

Safety Guidance

Conflict Management

Small Group Dynamics

Socializing & Personal Relationships

Logistics

Visa requirements

Flight Reservations

Lodging & Transit

Immunizations

Travelers Checklist

We plan to use this initial task list to guide our preparation.

Meet the Team!

Welcome to the Ethiopian Empowerment Project Blog! The purpose of this blog is to create a forum to post our progress, and experiences as we plan and execute our 2-month long summer excursion to Addis Ababa.

Our Mission: To assist beneficiaries of the Addis Ababa AIDS Treatment Project with the development of sustainable income generating opportunities.

Meet the team:
Liz: Coordinator and Duke Professor who has championed this cause and pulled this team together.
John: The Vegan, 6ft 3- UNC MBA student with a serious interest in small enterprise.
Ryan: The non-Vegan, 6ft 3- Duke MBA student with a strong background in finance.
Nondini: The Wellesley grad with anthropology and banking background who hails from the birthplace of Grameen Bank.
Beteal: The lively Duke Freshman who will serve as a valuable cultural liaison and research assistant to the team.